Bank Failures: Past and Present

March 15, 2023 | Eddie Arrieta, Research Associate

This chart description is for illustrative purposes only and its accuracy cannot be guaranteed. Please see full disclosures at end of PDF document in the web post. General description: Three-line chart showing bank failures and associated assets and deposits since 2001. Chart subtitle: While bank failures have been rare since the Global Financial Crisis, 2023 has already seen the shuttering of two large entities. Chart source: Federal Deposit Insurance Corporation, data as of March 15, 2023. Chart visual description: Left y-axis is labeled “($M)” and ranges from $0 to $400,000. X-axis in annual increments, from 2001 to 2023. Right y-axis is labeled “Bank Failures” and ranges from 0 to 180. Orange line plots Total Assets (L), dark orange line plots Total Deposits (L), and blue line plots Number of Bank Failures (R). Chart data description: Minimal data for all three lines up to 2008. Total Assets and Deposits lines peaked in 2008 at $373B and $234B, respectively, and decreased to near zero by 2012. Bank Failures line peaked in 2010 at 157, but in 2008 there were 25, 2009 there were 140, and after peaking took until 2015 to return to single digits. 2021 and 2022 had zero failures, and 2023 is currently at 2 failures with $319B in assets and $264 in deposits. End chart description. See disclosures at end of document.

Recent developments within the banking industry have revived difficult memories of the Global Financial Crisis (GFC). As many will recall, hundreds of financial institutions failed during that period, including Washington Mutual (WaMu), a savings and loan organization with approximately $307 billion in assets at the time of its collapse. The Federal Deposit Insurance Corporation (FDIC) ultimately sold the banking subsidiaries of WaMu to JP Morgan for $1.9 billion, marking the largest U.S. bank failure in history. In total, 25 banks with combined assets of more than $373 billion closed their doors in 2008, with additional failures in 2009 (140 banks) and 2010 (157 banks). In response to the widespread impact of the GFC, the federal government enacted many new laws and regulations pertaining to the financial sector, which resulted in greater industry oversight and more robust stress tests of bank operations. While additional failures have occurred since the GFC, most banks have been healthy and resilient in the last decade, including during the COVID-19 pandemic. All told, a total of just eight banks with a combined $678 million in assets failed from 2018–2022.

Needless to say, dynamics within the domestic banking industry have shifted in the last several days. After a run on its deposits, Silicon Valley Bank, which had once been the 16th largest bank in the United States, failed and was placed into receivership of the FDIC on March 10. Silicon Valley Bank is now the second-largest bank to fail in American history, with approximately $209 billion in total assets and $175 billion in deposits at the time of its collapse. Signature Bank was the next domino to fall over the weekend, again due in part to a run on its deposits, and now stands as the third-largest U.S. bank failure ever ($110 billion in assets and $88.6 billion in deposits). While these two cases represent the only bank failures thus far in 2023, many regional banks have seen their share prices drop significantly amid fears of contagion.

It is important to remember that while GFC-inspired regulations were designed specifically to mitigate the fallout from these types of events, the situation related to recent bank failures is fluid and could have ongoing impacts on global markets and central bank interest rate policy. Marquette will continue to monitor dynamics within the banking industry and provide updates and counsel to clients accordingly.

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